Holmes Trial Ignites a Legacy of Deceit and Financial Treachery

Conduct yields looming regulatory questions.

EDITOR’S NOTE: Bryan Nordley is the MedLearn Publishing healthcare writer and editor

In January, the saga of Elizabeth Holmes and her company Theranos, which once courted global publicity and wooed elite investors to the height of $9 billion, reached the end of a legal avalanche with multiple convictions for the former CEO, entrepreneur, and criminal conspirator. The length of time and red flags beg the question, why wasn’t she caught sooner? What are the long-term ramifications? The true consequences could not only rattle the regulatory processes governing labs and technology innovation but blasts a glaring spotlight on the legal responsibilities labs may have during criminal inquiries. So how did Holmes and her enterprise put everyday patients at risk who were simply looking to find answers to health concerns in a more optimized manner?

Theranos claimed to revolutionize testing through an analyzer device nicknamed the Edison. Holmes and the company knowingly and fraudulently mislead investors boasting that the analyzer could execute a complete range of clinical tests using nothing more than a small blood sample taken from a finger prick, with more accuracy and speed than standard procedures. None of that was ever true, to the extent that even patient results were falsified harming lives.

The saga of Theranos also revealed rifts in regulatory oversight. In a Forbes article, physician Scott Gottlieb, MD, offered important commentary on some of the regulatory flaws that, if corrected, could have halted the Theranos scheme far earlier. The article alleges that the FDA places too much emphasis on the diagnostic platform itself, which it includes more on the medical device spectrum. Gottlieb asserts that “when it comes to diagnostics like the blood testing platform that Theranos developed, FDA focuses mostly on the tools, and not the conduct of the lab, or how the many aspects of a diagnostic service are executed.”

Gottlieb suggests that a prior FDA review had indicated problems with the blood testing machines. In addition to claiming that Holmes played the system by hiding and “camouflaging” within the limited scope of FDA policy, he stated that “The agency’s actions may have prevented broader use of the platforms” as far back as 2016, a grave mishandling that helped to tarnish the development of potentially innovative products that everyday patients desperately need.

Beyond scrutinizing the FDA, Gottlieb also says Medicare and CLIA share the blame. Regulators working for Medicare under the direction of CLIA policy found Theranos labs to be improperly run. In 2016, CMS acted to revoke the CLIA certification for the Theranos lab in Newark, Calif., and prohibited Holmes from “owning, operating, or directing a laboratory for a minimum of two years.” The CMS investigation concluded that the lab’s conduct held an “immediate jeopardy to patient health and safety.” Theranos paid a $30,000 fine and ceased operations of the lab for two years.

The chief objective of CLIA is to probe how laboratories operate their services to achieve regulatory compliance and safety, to analyze and enforce how the tests are created while monitoring for accurate and consistent results. According to Gottlieb, “This distinction— between the diagnostic tool and the lab service—peaks to a more fundamental question when it comes to the proper oversight of diagnostics.”

CLIA operations, he acknowledges remain far from perfect. “The agency gets short shrift inside the Medicare program, and is chronically understaffed. …But for those who advocate for giving FDA a greater role in overseeing laboratory services and diagnostic tests—and use Theranos as a proof point—underestimate the complexity of running a lab company, and the difference between building a diagnostic tool and performing that test as a broad service.”

The Theranos scandal serves as a stark reminder that the government must prioritize patients’ lives when it sees red flags while remaining vigilant when it comes to conspiratorial schemes, big or small. As the Food and Drug Administration states, “The FDA’s Office of Criminal Investigations (OCI) will continue to investigate and help bring to justice individuals and companies responsible for putting the public health at risk.”

 Sick patients usually require a vast array of testing to facilitate their medical needs at every point in the journey, something that the Edison device, if operational, may have done while proving to eliminate hurdles and barriers, making testing much more streamlined and accessible. But the Edison was a mirage just like the alternative reality Elizabeth Holmes attempted to contrive. This saga impacts every day vulnerable patients who would benefit from advancements in healthcare but are likely to see even more legal strife as a consequence of the fraud, slowing, and scrutinizing of technological innovation.